Thursday, July 7, 2011

So how’s that targeting working out for you? (Part 1)

By Matt Tarleton, Project Manager.

AtMarket Street, we frequently work with communities to help them identify the clusters of economic activity in their regions that can serve as engines for future growth. From a practitioner’s point of view, focusing strategic investments and programs on specific clusters (a.k.a. “targeting”) can help ensure that limited budgets are spent wisely on developing opportunities that have best chance for success, and thus, offer the best return on investment.

Ten years ago, biotechnology was all the rage. Practically every state, chamber of commerce, or local government was targeting biotechnology. If you weren’t targeting biotech, something had to be wrong with you! Today, biotech still has promising opportunities but clean energy seems to be the new research and development target in vogue. Now let me make it abundantly clear that I am fervent supporter of clean energy investments at the federal, state, local, and household level. I agree that clean energy presents tremendous growth opportunities that support both economic and environmental sustainability. But every community cannot successfully compete for these jobs. The same was, and is still true, for biotechnology.

So out of curiosity, I wanted to take a look at recent trends in the scientific research and development sector. Officially defined by the North American Classification System (NAICS) under the code 5417, this sector comprises establishments that undertake research or apply research findings to create new products or processes. There are many other research and development activities captured under other classifications (see Pharmaceuticals; NAICS 3254) due to the fact that research and development is not the establishment’s primary revenue-generating activity. However, NAICS 5417 gives us strong coverage of the predominantly small (1-100 employees) establishments that are principally engaged in research and development related to biotechnology, clean energy, and a variety of other applications.

Consider the following:

As of 2010, the scientific research and development sector represents only one half of one percent of total national employment.

Roughly half (49.7 percent) of the sector’s employment is concentrated in 12 metropolitan areas. All twelve of these metropolitan areas are among the twenty largest metropolitan areas in the country. This leaves roughly 310,000 scientific research and development jobs to be divided among the rest of the country.

Between 1990 and 2010, the scientific research and development sector added 144,623 net new jobs, growing from 476,239 employees in 1990 to 620,862 employees in 2010.

Roughly half of this growth (72,083 jobs) occurred in only eight metropolitan areas. Roughly two-thirds of all growth (95,998 jobs) occurred in only 22 metropolitan areas. Therefore, fewer than 49,000 scientific research and development jobs were created in the last two decades outside of these 22 regions.

Only 62 metropolitan areas added more than 100 jobs in the sector over this twenty-year period. Of these 62 regions that added at least 100 jobs in the scientific research and development sector, only one metropolitan area (Ames, Iowa) possessed fewer than 100,000 residents in 2010.

While only 62 metropolitan areas added more than 100 jobs between 1990 and 2010, 60 metropolitan areas actually shed employment during that time. That leaves the vast majority of the nation’s metropolitan areas with sluggish growth, between one and 100 net new jobs created over a twenty-year period.

Keep these statistics in mind and look for “Part 2” in the weeks ahead. This will give you some time to consider what these findings mean to you and your community. In “Part 2” I’ll touch on the appropriate way to interpret them and what they mean for communities in today’s competitive environment where targeting is commonplace. HINT: It isn’t as pessimistic as it might appear.